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RenaissanceRe Maintained at Neutral

We have reiterated our Neutral recommendation on RenaissanceRe Holdings Ltd. (RNR) as the positive impacts of strategic divestitures, efficient capital deployment andstable ratings are partially offset by the headwinds. This property and casualty insurer carries a Zacks Rank #3 (Hold).

Why Reiterate?

RenaissanceRe did not witness any earnings momentum in the last 30 days. As a result, the Zacks Consensus Estimate for the company’s 2013 earnings per share remained constant at $10.11. This represents a year-over-year increase of 28.29%.

Even the Zacks Consensus Estimate for RenaissanceRe’s second-quarter earnings remained unchanged at $2.48, up 15.79% over the year-ago quarter. The company generated positive earnings surprise in 2 out of the past 4 quarters, with an average beat of 18.48%.

Further, RenaissanceRe has witnessed a positive trend in gross premiums over 2011 and 2012. Although gross premiums witnessed a decline in the first quarter of 2013, improving macroeconomic conditions and premium growth in the Lloyd’s segment are expected to maintain the positive growth trend in the future.

Moreover, the company has been deploying its excess capital to enhance shareholder wealth over the past several quarters. In Feb 2013, RenaissanceRe announced a 3.7% hike in its quarterly dividend, marking the 18th consecutive annual dividend increase. In the same month, the company increased its share buyback program to $500 million from $286 million as of Dec 31, 2012, so as to share more profits with investors.

The financial strength of RenaissanceRe is reinforced by its strong debt and credit ratings. In Jun 2013, A. M. Best affirmed the issuer credit rating of the company at “a-”. All debt ratings of the company were also affirmed with a stable outlook.

However, these positives were partly offset by negatives such asvolatile investment income, high competition and weather-related risks in the catastrophe insurance and reinsurance business.

Other Stocks to Consider

Other property and casualty insurers, which look attractive at the moment, are Alleghany Corporation (Y), American Safety Insurance Holdings Ltd. (ASI) and Hilltop Holdings Inc. (HTH). All these companies carry a Zacks Rank #1 (Strong Buy).